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One of the important developments in the early Obama administration is the prominence of the economics teams, with Orszag's OMB and Larry Summer's National Economic Council both emerging as internal powerhouses. With Summers, that was expected. Given the recession's ownership over the agenda and Summers' ownership over the administration's response, it was predictable that he'd emerge as a central player. Orszag's influence is only now coming into focus. He's not commanded the media attention of Summers, but there he was in the stimulus negotiations, last guy in the room, prompting Harry Reid to say, "in my mind, if there is a hero in all of this, it is Peter Orszag.” And it's not just stimulus. OMB -- where Orszag and his health care adviser, Rahm's brother Zeke Emanuel, are based -- has become arguably the key player on health care reform. Which is why I spent much of yesterday clarifying this line from Ben Smith's profile of Orszag:
The next step on health care, [Orszag] said, is a set of “changes to Medicare and Medicaid to make them more efficient, and to start using those programs more intelligently to lead the whole health care system.”This is not meant to signal that the administration intends to break health care reform into parts and begin by changing Medicare and Medicaid (an approach that has eloquent advocates including, among others, Maggie Mahar). Rather, the argument being made is around delivery reform: Orszag and others believe that the way you'll reform health care delivery -- things like physician payment and medical homes and using comparative effectiveness research -- is by beginning with Medicare and Medicaid. There are a few arguments for this. The first is the simple question of ownership: Medicare and Medicaid are the government's insurance programs. They can better their services without the fight that would be required to, say, impose new regulations on UnitedHealth. It's the difference between painting your house and getting the nighborhood association to force your neighbor to paint theirs. The second is that changes in Medicare and Medicaid can be better used to test and model innovations. Private insurers keep their data closed. Medicare and Medicaid, by contrast, open their records to researchers and experts. A successful experiment thus becomes a public success that other insurers can imitate. Conversely, a successful reform in a private insurer becomes a closely-guarded competitive advantage.And the third is size: Medicare is the single largest insurer in the nation, covering one out of seven Americans. When they institute a set of reforms, they change the game. This is in part because they have the clout to impose reforms on providers, while an individual insurer often does not. They make the way safe for others. Which is why there's fairly good evidence that when Medicare yawns, so too does the rest of the insurance industry. Related: The Number-Cruncher-in-Chief, my profile of Peter Orszag.
